Booksellers in the dark over costs escalating by 10-28 percent excluding the overheads post GST

Booksellers in the dark over costs escalating by 10-28 percent excluding the overheads post GST

New Delhi,August2:The government has placed books in the zero-tax category under the new Goods and Servicex Tax (GST). “We had earlier made a representation to the government and it has kindly accepted our suggestion to exempt printed books from GST,” said Sunil Sachdeva, President, The Federation of Publisher’s and Bookseller’s Association in India. “However, the electronic reproduction of the intellectual property will be charged with GST.”

However, despite this relaxation, the cost of book-making will go up by 10%-28% (excluding the overheads) and this will have to be paid directly by the publisher unless it is passed on to the reader, because there is no provision to claim Input Tax Credits (ITC) – taxes paid by suppliers – like in the erstwhile Value Added Tax (VAT). While the decision may be with the idea of making educational material easily accessible, the subtext, for non-English language publishers, for instance, has been largely unnoticed.

Ask Meera Johri, Publisher, Rajpal and Sons, a century-old publishing house known for publishing Harivansh Rai Bacchan, APJ Abdul Kalam and Ruskin Bond. She says, “The direct production cost of the book will increase in two ways – one with the organised sector of book making and secondly, with the disorganised ‘jobbers’ who do not comply under GST. It is clear that with the organised sector, there will be a 5% to 18% increase in the book production cost because the paper, printing ink, lamination, book-making plates and binding will be more expensive. But, what will happen to the ‘jobbers’ like book-binders, offset printers and lamination service providers whose annual turnover is less than Rs 20 lakh? They are huge in number and will have no option but to close shop.”

She adds, “The Marathi books market, for instance, is very price sensitive. If the cost of production of the books, including GST on royalties, is going to increase by 30%-45%, then I am not sure if the readers will accept this price hike.”

Why is it that Indian publishing is viewing GST with mixed feelings? There will be 12%-18% GST on all services and service providers who contribute towards making a book. In addition, there is a flat GST of 18% charged on the royalties paid to the authors, versus 10%-12% TDS earlier. “This is eyewash because the publishers of Indian language books will be forced to increase the cost of the book to recover the increase in the costs of production,” says Shailesh Bharatwasi, publisher of Hindi publishing company Hind Yugm.

“Will the reader benefit in this situation? The books that are currently sold at Rs 75-99 will now be priced at Rs 150-175. Can a middle-class reader accept this deep price hike in pursuit of leisure-reading in India?” Bharatwasi says.

Apart from the cost of production, the operations cost of GST management in the workflow of a publishing house is also set to increase. There will be 36 annual filings, three each month, in addition to the annual Income Tax submissions every year. “We need a dedicated desk to manage these filings. Honestly, we are not prepared for this,” says Johri.

Bookshop pressure

Adds Anup Kumar, the proprietor of Anupam Bookstore in Patna, which he has been running since 1965.“For more than 50 years I have been running the bookstore with minimum staff to make the operations self-sufficient. How will these bills be managed? I don’t know.”

Booksellers are the worst impacted also because Indian language bookshops operate on wafer-thin margins and are largely dependent on sales of stationary items that are taxed under the GST making them more expensive. The situation is aggravated with the uneven discount structures in book distribution.

Booksellers settle for a “trade discount” that ranges anywhere between 10% and 65%. Unlike the European fixed price policy, there is no organised discount structure for sales of books in India. There have been instances where the publishers have had to sell their books cheaper than production cost thanks to discount wars, which is most amplified in the digital domain. What adds to their woes is the fact that the distribution system, especially for books in Indian languages, is perennially in a shambles at all levels – meta-data creation, cataloguing, warehousing and on-road distribution.